State audit of Oakland school district finances highly critical

In a newly released audit of the Oakland Unified School District‘s finances from two years ago, the state Comptroller’s Office questions the district’s ability to continue “as a going concern.”

Listing dozens of accounting flaws, the Comptroller’s Office declined to even offer an audit opinion on the district’s books. It questioned the district’s continuation based on reserves, saying that although OUSD listed reserve amounts that exceeded the 2 percent of expenditures required by law, some funds listed appeared to be obligated elsewhere and not truly available.

District officials scoffed at the Comptroller’s office findings Wednesday during a board meeting and in written responses.

“Oakland Unified School District (the District) still exists and operates as a Local Educational Agency, two subsequent years after fiscal year 2010-2011,” in written response to the audit.

“The District disagrees with the majority of the aforementioned audit findings The State Controller’s Office Auditors (SCO Auditors) requested and the District provided a revised schedule of assets. Therefore, many of the findings no longer exist.”

Sounding weary of state constraints on OUSD after enduring six years of state control from 2003 to 2009, board members bemoaned what the district has spent to aid the state in scrutinizing its record keeping.

“We’ve had about $8 million of our money tied up by the state audit over the years,” said board member Jody London at Wednesday’s meeting. “A big chunk of our budget is being held hostage.”

Board President David Kakishiba said only that the audit was received during the past week and that the board and its audit committee plan to meet with state auditors June 19 to hear details about the findings.

By law, the district has 60 days to respond, he said.

The Oakland district was under state control for six years because of lax accounting and financial controls. It regained autonomy in 2009 and elected Dr. Tony Smith to be superintendent.

Since then the district has had an uneasy relationship with the state, and has been required to pay salaries for several state financial accountants who keep a watch on OUSD operations.

Mike Hutchinson, who ran for school board last November and is a vocal critic of the district, told board members the audit is very disturbing.

“I don’t understand why we are barreling forward with this (budget discussion) when the state says these numbers are unreliable,” he said when the board began discussing potential budgets for the new academic year starting in September.

“We need to stop and make sure we are making all our decisions on factual numbers,” he said.

The audit lists OUSD assets of $832 million at year end 2011 but liabilities of $892 million, leaving the district with net assets of a negative $60 million. Much of the debt is from borrowing for capital improvements in two bond measures.

It lists a budget expenses of $519 million for that year but of that $39 million is debt service and 59 million is physical plant services.
OUSD’s operating budget has been roughly $415 million in recent years. Its budget for the new year will depend on how the state decides to fund education for the new fiscal year starting July 1. The district cannot finalize its budget, however, until the state of California finalizes its own budget for the new new fiscal year.

Neither Superintendent Smith, who is scheduled to step down on June 30, nor Dr. Gary Yee, who will become acting Superintendent after June 30, attended Wednesday’s meeting.

5 Responses

I agree with Mike Hutchinson. It does not surprise me that he lost his election. The voters of Oakland are idiots and elect idiots to the school board, as they do to the City Clowncil and the office of mayor.

I do not trust OUSD or anything said on it’s behalf. They are not trustworthy, nor are they competent. The best thing for the children of Oakland would be it’s dissolution and letting the parents use the tax money to shop for quality educational opportunities. I wish I could, I surely could spend the money on my child more effectively, and that’s why I voted with my feet and placed her in a different district. Given the drastic decline in OUSD enrollment relative to city population of student ages indicates I am not alone.

I do not have kids in school. But I do pay taxes and live in Oakland. I think it is a crime how they shut down perfectly good schools, then build these eyesores such as the Fruitvale school and the atrocity next to Laney college and OUSD offices. It is no surprise that they have money problems when you see the extravagant but useless architecture which may “seem” like it woudl be a stimulating place to learn. But in reality, the kids won’t get textbooks, and whatever computers they use will be garbage.

Odd response from school board members that “we’re still here” to a state audit finding that OUSD is not a “going concern.” The going concern phrase is a technical auditing term that means OUSD has its fiscal feet firmly planted on banana peels. It doesn’t mean that the auditors were predicting imminent collapse but that it could easily fail.

But it’s also odd that after years of state management that OUSD apparently still has an unreliable accounting system. Why would the state relinquish control before the accounting system was fixed? Was it working when the state exited?